Sink or Swim

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What we are following this week:

• Global Politics: Red Sea, US x Iran, Andy Burnham

• Domestic Politics: Maine Senate, Clarity Act, Canada Tariffs

• Economics: Chinese Open Language Models, July Fed Decision

• We Called It: The World Cup

Global Politics: Red Sea, US x Iran, Andy Burnham

Houthi attacks on boats in the Red Sea are threatening another crucial shipping route while President Trump threatens to strike Iranian infrastructure over attacks on vessels in the Strait of Hormuz. Meanwhile Andy Burnham officially took office as Prime Minister of the UK, and we take a look at his political future. This week:

Red Sea

• Conflict

  • 78%: The probability that any commercial vessel in the Red Sea is sunk, seized, or suffers a crew fatality during an attack by August 31.

  • 38%: The probability that Saudi Arabia strikes Houthi targets in the Red Sea in the next 60 days.

  • 8%: The probability that the Houthis publicly rescind or suspend the Saudi maritime embargo by August 31.

• Shipping Costs

  • 72%: The probability that Maersk or MSC publicly announce the suspension of Red Sea/Suez service to divert vessels around the Cape of Good Hope before September 30

  • 82%: the probability that Red Sea war-risk premiums exceed 1% of hull value by September 15.

  • 38%: The probability that Bab el-Mandeb will be effectively closed to commercial transit for a continuous period of 72 hours before October 1.

    • The VICO model sees a serious increase in insurance costs in the Red Sea on the back of shipping conflict. This suggests that this issue is likely to have substantive ramifications, and is not being overhyped.

• If then/then

  • One of our VICO Pro features is the If then/then, which allows users to visualize different possible scenarios, and assess their consequences.

  • What if shipping traffic through the Red Sea decreases by 50% or more in response to Houthi attacks?

    • Then: 75%: Crude oil prices rise $8-$12 per barrel, which pushes retail diesel costs up 4-6%.

      • Then: 60%: The sustained doubling of ocean freight rates and higher energy costs add 0.3 to 0.5 percentage points to global core inflation (CPI), particularly in the Eurozone and the UK.

      • Then: 65%: US Gulf Coast refining companies, including Valero Energy Corporation, Marathon Petroleum Corporation, and Phillips 66, increase their ultra-low sulfur diesel (ULSD) exports to Europe by 15–25% (an additional 180,000–250,000 bpd) to cover European supply deficits.

US x Iran

• 18%: The probability that the US and Iran reach a permanent or temporary ceasefire in the next 30 days.

• 7%: The probability that the US lifts its naval blockade of Iranian ports in the next 30 days.

• 30%: The probability that Iran reopens the Strait of Hormuz in the next 30 days.

• 75%: The probability that the US strikes Iranian bridges or power plants in the next 14 days.

  • The VICO model remains skeptical of a deal, and sees escalating US strikes on Iranian infrastructure as the most likely next step of the conflict.

Andy Burnham

• 12%: The probability that Burnham is out as Prime Minister in the next year

• 22%: The probability that Burnham is out as Prime Minister in the next two years.

• 18%: The probability that the UK holds a snap election in the next year.

  • The VICO model notes that while the UK has gone through 7 prime ministers in just 10 years, Burnham inherits a uniquely strong majority and the ability to delay the next elections to late 2029. With the UK currently facing economic troubles, the model argues that there is little incentive to call a snap election and instead that Burnham is likely to focus on his long-term goals.

Domestic Politics: Maine Senate, Clarity Act, Canada Tariffs

Troy Jackson has all but secured the Democratic nomination for Senate in Maine, replacing Graham Platner and setting up a fight with Susan Collins in the general. At the same time the Clarity Act, a broad crypto regulatory framework, gained momentum after the White House agreed with a group Senators on a contentious ethics provision. And the President announced a 50% tariff on a number of Canadian goods including wine and cement. This week:

Maine Senate

• In our newsletter two weeks ago, immediately off the back of Platner dropping out, we put the probability of Troy Jackson winning the nomination at 62%, ahead of Polymarket’s 47%. That forecast is now at 99% on Polymarket.

• 28%: The probability that Troy Jackson wins the Maine Senate election. (Polymarket: 69%)

  • The VICO model stresses that Collins now enjoys a number of advantages. Jackson will have limited time to introduce himself to the electorate and recover from a large fundraising deficit. The model also argues that even though polling slightly favors Jackson, Collins has a long track record of over-performing weak polls.

• 30%: The probability that Democrats take the Senate in the midterms.

Clarity Act

• 70%: The probability that the Clarity Act becomes law in 2026. (Polymarket: 39%)

  • The VICO model is far more bullish on the Clarity Act than prediction markets, citing a bipartisan committee vote and strong executive support to suggest the bill is likely to be passed this year.

Canada Tariffs

• 12%: The probability that the US cancels the 50% tariff on Canadian goods in the next 120 days.

• 55%: The probability that the US imposes a 50% or greater tariff on another country in the next 120 days.

• 42%: The probability that the US imposes a 50% or greater tariff on Mexico in the next 120 days.

  • The VICO model believes that any deal to cancel the Canadian tariffs is highly unlikely, and that more tariffs of a similar scale may still be on the way, specifically against Mexico.

Economics: Chinese Open Language Models, July Fed Decision

Treasury Secretary Scott Bessent said the US would look into sanctioning China over AI model IP theft as fears grow of a narrowing gap between the US and China on frontier LLMs. Meanwhile, the Fed has a meeting next week, and the market is waiting to see if rates remain the same or increase. This week:

Chinese Open Language Models

• Widespread Use

  • 22%: The probability that more than 50% of Fortune 500 companies use Chinese-developed language models in the next 3 years.

  • 58%: The probability that DeepSeek files IPO documents in mainland China in 2026.

  • 28%: The probability that any Chinese language model surpasses the total users of Claude or ChatGPT in the next 3 years.

• National Security

  • 12%: The probability that a documented supply-chain security incident is publicly attributed to a Chinese open-weight model in production US infrastructure before December 31, 2026?

  • 55%: The probability that the US government issues a formal rule restricting federal or federal-contractor use of Chinese open-weight AI models before December 31, 2026?

  • The odds for each specific model to be formally import restricted (via entity list or otherwise) by the US government in the next 3 years:

    • 72%: DeepSeek

    • 50%: Alibaba’s QWEN Model

    • 62%: Moonshot AI

    • 70%: Zhipu AI

July Fed Decision

• 24%: The probability that the Fed raises rates at their meeting next week. (Polymarket: 24%)

  • While the VICO model is high on the odds of a rate hike later this year 85% (Polymarket: 66%), the model notes that any hike is likely to come later in the year as the Fed gains more information about the impact of the Iran war on inflation.

We Called It: The World Cup

• In our June 25th newsletter, we called Spain as having the best odds to win the whole tournament, despite them being just third on Kalshi.

• And in our newsletter last week, we gave Spain a 72% chance to beat Argentina, well above Kalshi’s 57%. But more than that, the model predicted how Spain would win.

  • From last week’s newsletter: “The VICO model argues that Spain’s fullback pressure is likely to make Messi less effective, as he will be forced to play defense more, especially against a possession-heavy team like Spain.”

    • Messi had 54 touches in the game against Spain, recording no assists, and not even a single shot on target until the 117th minute.

  • Argentina were suffocated by Spain’s possession just as the model predicted, and the greatest player of all time became a near non-factor exactly in line with the model’s forecast.

• We don’t normally focus on sports or other topics outside of politics, economics or geopolitics, but we tried out this fun experiment and have been pleased to see how well the model performed.

About Us

• VICO empowers decision makers to quantify and navigate event risk. Forecast, simulate and monitor political, geopolitical and economic events.

• Learn more and obtain a beta account at www.vico.io or email us at inquire@vico.io

Methodology and Copyright Notes:

All percentage changes are over the last week except where noted.

Our proprietary AI models are rigorously backtested and do not rely on any betting market information.

All data and content are owned by and copyrighted by VICO Technologies Inc.